You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees — before you sell a single product, there are startup costs associated with launching a Massachusetts LLC.
Make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Massachusetts startup fees here.
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Overall Massachusetts LLC Formation Costs
LLC Name Reservation Fee
Do you have a business name in mind, but you’re not ready to use it? You might think about protecting it by filing a name reservation. Reserving a business name isn’t a prerequisite for forming an LLC, but it’s a nice option to have. It costs $30 to reserve a name for 60 days. After that, you can renew it for another $30. But if your business is ready to go, it will save you money to file your Certificate of Organization right away, since that automatically registers your name with the state.
To clarify, most states don’t require name reservations, and they’re rarely necessary. If you’re concerned about someone else registering the name you want, you could opt to simply form your LLC instead of reserving the name.
Whether you reserve your business name or not, you should always perform a Massachusetts business name search to make sure the name you want is available.
Certificate of Organization Fee
This is the big one, the most important (and most expensive) form that you’ll file to start your Massachusetts LLC. The Certificate of Organization is what officially puts your business on record with the Secretary of the Commonwealth. But it’s not cheap. The filing fee is $500 by mail and $520 if you’re submitting it online or by fax. The good news is that you only need to file the Certificate of Organization once, so as long as it’s accepted, you won’t have to pay it again.
The information you’ll need to file your Certificate of Organization includes your LLC’s federal identification number, your LLC’s official business name, your LLC’s business address in Massachusetts, the date of your LLC’s dissolution (if applicable), the name and address of your LLC’s resident agent, the name and address of each LLC manager (if applicable), the name and address of each person authorized to execute documents filed with the Corporations Division (must list at least one person if you didn’t list any managers), the name and address of each person “authorized to execute, acknowledge, deliver, and record any recordable instrument purporting to affect an interest in real property recorded with a registry of deeds or district office of the land court,” your signature, and your resident agent’s signature.
Business and Professional Licenses
You filed your Certificate of Organization, but don’t go conducting business just yet. Your LLC may need to acquire certain licenses first. This all depends on your location and the type of business you’re doing. For example, barbers and cosmetologists need to apply for licensure with the Board of Cosmetology and Barbering Services Administration. Take a look at the Division of Professional Licensure page to see which business types need licenses. Additionally, your city and/or county may have separate licensure requirements, so be sure to also check with your local government.
What are some of the most commonly required business licenses for Massachusetts LLCs? If your business operates in a regulated industry, you will probably need some sort of professional license to operate in compliance with state law. On the municipal level, things like alarm permits, building permits, and zoning permits are all very common.
LLC Formation Service
Starting an LLC in Massachusetts can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC service. These services take care of the registration process for you, so you don’t have to spend time on research, paperwork, and filings.
Most of these services (like LegalZoom or ZenBusiness) offer basic LLC formation services like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, operating agreements, and expedited filing.
Resident Agent Service
Appointing a Massachusetts resident agent is an important part of your LLC formation process. Your resident agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Massachusetts business law. In short, you need an agent you can trust.
While you can be the resident agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A resident agent service ensures that your annual reports and other forms are filed efficiently, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2,000.
Cost variations depend on the experience and location of the lawyer. But to ensure that you find a good fit, you’ll need to do some research. Search, compare, and contact business lawyers on a site like Avvo, which provides access to an entire database of attorneys, including Massachusetts business attorneys. It allows you to sort by their locations, rates, specialties, and more, helping you narrow down your options.
If you don’t want to go digging for your own attorney, we compiled the following list of highly rated business lawyers in Massachusetts. All of these attorneys are primarily focused on the business world, they all receive five-star ratings from clients, and they all have excellent Avvo ratings.
- Joe Culk (also active in NC)
- Christopher Fein
- Sankeetha Selvarajah (also active in NY)
- Todd Rosenfield
- Emily Smith-Lee
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Massachusetts. Foreign LLCs don’t need to file the Certificate of Organization; instead, they must submit an “Application for Registration.”
All foreign business entities are required to foreign qualify in Massachusetts, or they could incur some pretty severe penalties. Like the Certificate of Organization, the Application for Registration is somewhat expensive: $500. But also like the Certificate of Organization, you only need to file it once.
LLC Annual Fees
Some LLC expenses only relate to starting the business, like the Certificate of Organization or the name reservation fees. Others are recurring, namely the annual report. Every year, Massachusetts LLCs must file an annual report to keep the state updated on their most current information. Each of these reports costs $500 for mailed forms and $520 for online or faxed ones, so make sure you write it into your annual budget.
The information required to file your annual report includes your LLC’s federal identification number, the official business name of your LLC, the location of your LLC’s principal business address, a brief description of the nature of your business, the dissolution date (if applicable), the name and address of your resident agent, the name and address of each LLC manager (if applicable), the name and address of each person authorized to execute documents filed with the Corporations Division (at least one person if you don’t list any managers), the name and address of each person “authorized to execute, acknowledge, deliver, and record any recordable instrument purporting to affect an interest in real property,” and your signature.
For more information on Massachusetts LLC annual reports, check out our full article on this topic.
There are only particular circumstances that would cause your LLC to pay taxes in Massachusetts. Federally, LLCs are treated as “pass-through” entities, which means that the business itself doesn’t need to file its own separate tax return. Rather, the owners and/or members report income and losses on their individual returns.
At the state level, Massachusetts doesn’t impose a franchise or privilege tax on its LLCs. However, if your company maintains employees, it must pay a withholding or unemployment tax, and if it sells merchandise, it must pay a sales and/or use tax. You can register for these taxes online through MassTaxConnect.
It’s a little rarer, but if you’ve set up your LLC to be taxed as a corporation, it will be subject to an 8% corporate income tax and the Corporate Excise Tax.
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Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Failure to submit a required filing — most commonly an annual report — will land your LLC in “delinquent” status, and it’s not a fun place to be. It means that you’re out of good standing with the state and can no longer do things like foreign qualify in other states, apply for business loans, renew certain professional licenses, and more. Plus, if you fail to file two annual reports in a row, your LLC will be administratively dissolved and prohibited from doing business in the state until it reconciles its outstanding filings/fees and files for reinstatement.
And if you don’t pay any required taxes? You will be charged a penalty of 1% of the outstanding amount per month (up to 25%). In short, keeping up with your filings and fees will save you a lot of trouble, stress, and money in the future.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Massachusetts.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees — like annual reports and taxes — so your business doesn’t fall out of good standing.
Key Steps for Starting a Massachusetts LLC
- The first step to forming a Massachusetts LLC is to come up with a good name for your business. You’ll want to make sure the name you want is still available and hasn’t already been claimed by another business, so you’ll need to search the state’s business database to verify its availability.
- Next, you’ll need to choose your resident agent. While you can legally serve as your own resident agent in Massachusetts, this role can actually be more of a hassle than you might expect. That’s why we always recommend hiring a reputable resident agent service that can handle the responsibility of this position on your behalf.
- The third step involves the preparation and filing of your Certificate of Organization. You’ll need to fill out the paperwork and pay a $500 fee. Once the state processes this document, your LLC will be officially open for business!
- That’s not the end of the road for the startup process though, as you’ll also need to create an operating agreement for your LLC. There is no legal requirement for Massachusetts LLCs to have written operating agreements, but it’s still an extremely important element of any LLC. The operating agreement is an internal document that outlines how your LLC will operate, and there are several aspects of this document that can prevent messy ownership disputes down the line.
- You will also need to acquire a federal tax ID number (also known as an EIN, or employer identification number). This is essentially a Social Security number for your business, as it is a nine-digit code used to file taxes, hire employees, open business banking accounts, and more.
- Next, you’ll need to register for any relevant taxes with the Massachusetts Department of Revenue, and also obtain all licenses and permits that apply to your business type. Keep in mind that, depending on the nature of your business, you might require licenses from the federal, state, county, and municipal governments.
Once you’ve finished all of these steps, you’re ready to operate a compliant business entity with the state of Massachusetts!
Key Steps for Maintaining a Massachusetts LLC
After you’ve completed all of the items in the previous section, you’ll need to focus on maintaining your LLC. The first step in this process is to open a business bank account. This will help you keep your business and personal expenses entirely separate, and it will also help immensely with your accounting and taxation responsibilities.
You should also keep detailed records of every financial transaction that takes place with your LLC. This means maintaining a file of invoices for every purchase and sale you make, along with information regarding your employees or contractors and the work they perform for your business.
As we already mentioned, annual reports are a key component of LLC maintenance in this state, and there are harsh financial penalties for delinquent reports. Additionally, you might want to hold an annual meeting to discuss goals and priorities for your LLC, although this is an optional step.
Frequently Asked Questions
Before we wrap things up, let’s take a look at some of the most common questions we hear from readers regarding the LLC formation process in Massachusetts.
What are the state business tax rates in Massachusetts?
If your LLC is taxed like a sole proprietorship or general partnership, you’ll need to pay taxes on your business income at the state’s personal income tax rate of 5%. If your LLC is taxed like a corporation, you’re required to pay Massachusetts’ 8% corporate income tax on your business revenue.
How quickly does Massachusetts process LLC formations?
The Secretary of State should be able to process your LLC’s formation within just 1-2 business days.
How many small businesses are there in Massachusetts today?
The state of Massachusetts is home to nearly 600,000 small businesses. Entrepreneurs of all backgrounds and business types find that Massachusetts is a great place to own and operate a small business.
What are the top small business resources and websites in Massachusetts?
The Massachusetts chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for Massachusetts LLCs. The U.S. Small Business Administration’s Massachusetts District Office is another valuable resource, and the state’s small business resource page also has plenty of good info.
Should I form my LLC in Massachusetts, or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.